Oil prices rose Thursday as investors became more optimistic about the influence of production cuts made by the world's major oil exporters.
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Some are still buying based on U.S. government data from Wednesday showing falling storage levels, a trend some attribute to global output cuts. Others believe these exporters, led by the Organization of the Petroleum Exporting Countries, are likely to keep cutting back.
Light, sweet crude for June delivery recently gained 56 cents, or 1.2%, to $47.89 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, gained 55 cents, or 1.1%, to $50.77 a barrel on ICE Futures Europe.
The gains put crude prices up in four of the past five sessions at a time when many were saying the momentum had turned downward. Prices are now up about 5% since they settled at a five-month low a week ago.
OPEC data released Thursday showed the cartel reduced production further in April, even as top oil exporter Saudi Arabia raised output by almost 50,000 barrels a day. Overall, production decreased by 18,000 barrels a day in April, to average 31.73 million barrels a day.
The report also said that non-OPEC oil supply could grow by 950,000 barrels a day this year, 370,000 barrels a day more than its previous forecast. But even that could be helping prices higher with just a few weeks left before OPEC members meet to decide whether to extend output cuts scheduled to end after June, Tim Evans, a Citi Futures analyst, said in a note.
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"While this weakens the outlook relative to a month ago, we note that this final assessment prior to the upcoming May 25 summit also strengthens the argument for either an extension of the current production limits or for further cuts to keep the rebalancing of the larger crude oil market on track," Mr. Evans added.
Concern that these cuts weren't reducing the global crude glut has put pressure on oil prices for several months. Data from the Energy Information Administration Wednesday eased some of that pressure when it showed U.S. crude stockpiles dropped by 5.2 million barrels in the week ended May 5, far exceeding market expectations.
Investors, who were previously skeptical of a move by OPEC and external producers such as Russia to cut global crude supply by about 2%, have interpreted the drawdown in U.S. stocks as a sign that the cartel's action is working.
"The selloff was overdone and was mainly sentiment driven as people were getting impatient with OPEC," said James McCullagh , an oil products analyst at Energy Aspects. "The key thing...this morning with everyone focusing on the EIA stocks, they are the most believable and finally we see a stock draw yesterday."
Energy Aspects says Brent crude could rise to $63 a barrel in the third quarter and $68 a barrel in the fourth quarter of 2017.
The EIA figures also revealed a surprise decrease in gasoline and distillate inventories, which helped mitigate worries that U.S. commuters weren't soaking up enough gasoline to offset supply.
Gasoline demand rose to the highest level since late March to more than 9.2 million barrels a day, but still down 2.4% from the same period last year, according to the data.
Vivek Dhar, a commodities strategist at Commonwealth Bank of Australia, noted that overall inventories measured by the days of demand they can meet have fallen closest to the six-year historic average this year, which he called a sign of robust demand.
"It wasn't there until yesterday," said Bob Yawger, director of the futures division at Mizuho Securities USA Inc., adding signs of strong demand can carry oil trading for several sessions. "This is the most important thing in energy all year long: gasoline demand season."
Gasoline futures recently gained 1.3% to $1.5598 a gallon and diesel futures rose 1% to $1.4898 a gallon.
Summer Said and Jenny W. Hsu contributed to this article.
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(END) Dow Jones Newswires
May 11, 2017 13:35 ET (17:35 GMT)